Services, particularly banking, insurance, and business services, account by far for the largest proportion of GDP while industry continues to decline in importance. GDP growth slipped in 2001-03 as the global downturn, the high value of the pound, and the bursting of the "new economy" bubble hurt manufacturing and exports. Output recovered in 2004, to 3.2% growth, then slowed to 1.7% in 2005 and 2.7% in 2006. " (Exxun.com, 2007)
The Economy of the United Kingdom can be classified as the "capitalist" economy. The most prominent characteristic of the capitalist economy is the control of few people on a large amount of Capital. These people are also responsible for taking important economic decisions.
With the changing international circumstances the Governments of the world including United Kingdom felt the need of restricting the use of power of a specific group of people for their own commercial interests. This intervention resulted in shape of the British economy which can described as a "mixed" economy, with government playing an important role along with private enterprise.
Although British people often disagree about exactly where to draw the line between their beliefs regarding, both free enterprise and government management, the mixed economy they have developed has been remarkably successful.
The natural resources are considered as the most important ingredient of a nation's economic system. The United Kingdom is blessed with enormous reserves of minerals. The fertile soil and the moderate climatic conditions effectively eke the farming process.The labour plays vital role in the growth of an economy. Higher level of working population is considered as an important indicator of a progressive economy.
The labour market of the U.K has always remained competitive due to an abundant supply of productive labour. A unique characteristic of the labour force is diversity. The 20th century British labour force constituted Asians and Latin Americans as the major part. This supply of the immigrants in the British job market also resulted in some periods of high unemployment. Many of these immigrants provide their services on relatively lower wages as compare to the native citizens. With the abundant supply of labour and the factors of production the economic growth multiplied increasing the chances for immigrants to find more job opportunities (Conte & Karr, 2001).
British economy was facing boom before being hit by the events of 9/11. The economy had fastest growth rate and the lowest unemployment rate which was kept low for thirty years to a level of 3.8% in 2001 but after 9/11 the unemployment rate rose to 6.4% in 2003 more than a million jobs were loss lost during that period. The Government has applied different policies in order to address the issues facing the economy. Govt. has been trying to stable the economy by using cutting of taxes and lowering the interest rates, but these options are for short-term period. There are also some long-term issues to be reviewed.
The U.K. economy has benefited from privatisation of industry, free market policies and
the development of its oil and gas sector, the largest in the EU. (The Galt Global Review, 2007)
Speeding the recovery:
For the policy makers the main issue was to accelerate the